Private wealth advisers are trained — appropriately — to be fee‑sensitive. Over long horizons, costs compound just as returns do. So, when advisers compare private real estate investments with publicly traded REIT funds, the difference in headline fees can appear stark.
A private real estate fund may charge 1.5 percent or more in management fees, plus performance‑based compensation. A REIT ETF may charge 25 basis points or 30 basis points. The conclusion seems obvious: public real estate is cheaper.
But that conclusion is based on a misunderstanding of what those numbers actually represent. A REIT mutual fund or ETF expense ratio reflects the cost of managing a portfolio of securities, not the cost of managing real estate.
That fee pays for stock selection or index
